Rounding out the month of July, SureTrack Product Manager, JC Hoyt, provided a pre-harvest market update.
“Weather versus demand is the theme of today’s conversation. Rain makes grain,” Hoyt said, “and this year we are going to have a lot of both corn and soybeans. China came in yesterday (7/29) and made huge purchases and the market only moved about a quarter of a cent.”
Across the Midwest, favorable weather conditions have created strong corn and soybean crops heading into harvest, with a considerable amount of bushels still being carried over in bin storage.
“It has been a great growing season, compared to last year. Some of the estimates that we are hearing on the corn side, anyway, are coming in 180+. Soybeans are above trendline, as well. So even though we have had nine consecutive days of purchases from China, that doesn’t trump a 72% good to excellent crop report from the USDA,” Hoyt says.
When combined with the nearly 7.5 million additional acres of soybeans, more the 2 million additional acres of corn, and the fact that the U.S. still has a lot of old crop in storage, there is going to be a lot of crop to move.
Other factors driving grain markets are tariffs, oil prices and a weaker US dollar that will likely translate to additional purchases from China.
“We are still in a new world environment and trying to figure out what that means for the economy,” Hoyt says, “So with some ethanol plants coming back on-line and spending beginning to increase with states opening back up, there are a lot of unknowns.”
Hoyt says that looking at old crop, and the five year seasonal price trend, which is what we are trading in for old crop, there is still a lot of corn in the bin without a home. He notes that ethanol plants have yet to reach full capacity, only grinding around three-quarters of the corn they were at this time last year.
“We still have a lot of guys with crop in the bins waiting for the summertime rally. Unfortunately, we saw that in the market around first of July and it wasn’t a lot,” he says. “And barring a few isolated storms, and high-heat-high-humidity nights, the corn crop is pretty well set.”
Competition in the soybean market will likely come out of a record 2020-2021 soybean harvest in South America, with reporting indicating a near 10% increase in Brazilian soybean acres in 2020. The increase in acres, fueled by higher profit margins and a weaker US dollar has already spurred the sale of much of the crop.
Reiterating the message of SureTrack Senior V.P., Neal Dilawri, in last week’s CoffeeTalk, Hoyt says that this year especially, knowing your numbers on the farm and having a solid diversification plan in place will be critical.
“BinManager, is all about keeping grain in condition. And we know from our customers that it has done its part; unfortunately, the market hasn’t done its part. Now, we are in a situation where knowing the numbers is more important than ever. The talk right now is that we are going to break contract lows, and I think we are going to do it with 2.80 corn, but I think that’s going to be a slow grind getting there, probably in the October time period” he says.
The line-of-sight Hoyt says that he is focused on is 2021, sharing that in addition to pricing out crop in the bin, he is hopeful that some forward marketing is taking place, too.
“I hope that this crop in the field is forward marketed, and I also hope that there’s quite a bit of forward contracting of the 2021 crop,” he says.
“The end-to-end supply chain SureTrack offers helps put that whole picture in place to not only find the best markets, but to grow for the best markets.”
To watch this webinar and others, visit the CoffeeTalk page on the SureTrack Community or our Facebook page. A free at-your-convenience two-week trial is also available for growers to test-drive the system with no commitment.